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Hi, I have seen the Merton value of equity formula given as: However in the text, it is provided as follows: What is the significance of the Pt(T) variable? It is defined as the price of a $1 0 coupon bond that matures at time T. Does it act as some kind of discount factor?

Hi, I tried to search Model 3 but the search didn't come up with anything meaningful. Models 3 and 4 both have an alpha factor in them, yet the text doesn't define what alpha is. So what does this alpha factor represent and are we expected to derive it on the exam or will it be provided...

I was looking at the pass rate info from the homepage link, and the data only goes up to 2014. Is there updated information somewhere? I am just curious to see what they are now since it seems like the exams have gotten much tougher.

Hi, In the materials we are provided with Basel II, Basel II.5, Basel III - so if we are asked to determine whether a capital ratio is adequate are we supposed to assume fully phased in Basel III, meaning to include the countercyclical and other buffers? Also, it seems like Basel II.5 is...

It says In addition, as individual capital commitments to a hedge fund manager tend to be small in relation to the investor’s overall portfolio, it is critical that a hedge fund investment carries the same limited liability protection as buying shares of a...

Hi all, Can someone explain why the bank gets paid whether or not the bank defaults or not? They receive $20 million, which is the difference between the value at maturity and the value of the debt at t=0. If the debt defaults, they get $30 million which is the difference betweeen the value...

Hi, I would like to make a suggestion for future practice question PDFs - is it possible to include the question stem and answer choices int he answer explanations? It is a PITA to scroll back and forth especially on a mobile device. The GARP practice exam PDFs already follow this format...

Hi, We are given the following 2 asset portfolio VaR formula: If no weights are given, how does the above formula change? Or is it just easier to calculate weights?

Hello, Does anyone have a count for the Part 2 practice questions? I just want to get an approximation to track my progress and ensure I stay on schedule

I read somewhere that the full revaluation VaR will be underestimated compared to linear approximation. How is this possible? I thought delta normal VaR underestimates due to the convex nature of options

The examples in the notes are pretty good, but they are only for the Euro call option. Just wondering if there is an easier way to keep things straight as I'm fearful GARP will throw a put option question from left field. For European call: delta increases with price, increases with maturity...

What is the difference between probability density function and inverse cumulative distribution function, if any? They both look the same

Is there a spreadsheet that covers the Tuckman Key Rate 01, Partial 01 and Partial Buckets concepts?

On page 172 of the Tuckman reading of Book 4, it states: "In figures 9-2 and 9-3, for any given maturity, zero-coupon yields exceed par yields, which, in turn, exceed the 9% coupon yields." If you look at figures 9-2 and 9-3, the par yield of the C-STRIPS are greater than both the zero coupon...

We are provided with the following CDF formula for a continuous uniform distribution: (a-b1)/(b2-b1) If b1 represents the lower bound, per the reading, then what does a represent?

Hello I tried searching the forum but couldn't find any related thread. In the BT slides, the value of a forward is given as: F0=(S0-K)e^rT However, in Hull there is a version presented as: F0=S0e^-qT-Ke^-rT It's kind of confusing because in Hull, the top formula is the value of a forward...

Hello My TI BA II Plus calculator can automatically calculate SD & variance using the STAT & DATA functions. Are we expected to calculate by hand? Seeing as how FRM likes to throw curveball questions, could they throw in a var/SD question that would require a by hand approach?

Hello, I came across this question: 5.. The spot foreign currency exchange rate is EUR/USD $1.4296/$1.4304. Each of the following is true about this quote except: a) The spread is 8 pips b) If the domestic currency is the US dollar (USD), from the perspective of an American trader, as EUR is...

Hi, Two quick questions about the exam: 1. I noticed in a lot of the questions, the answer of the first question is required to answer the next question. Is the FRM exam structured like this? 2. What is the recommended decimal usage for the calculator?